The Sindh government has released Pakistan State Oil’s (PSO) oil cargo following the intervention of the Special Investment Facilitation Council (SIFC), which stepped in to mediate a dispute between the provincial government and the oil industry over the imposition of the Sindh Infrastructure Development Cess (SIDC).
According to official sources quoted by The Express Tribune, the SIFC’s intervention came as a preventive measure to avert a potential fuel shortage in the country. “Following the SIFC’s involvement, the Sindh government has allowed the oil industry to import cargoes until the end of October under the existing undertaking mechanism,” one official said.
A Parco cargo has already arrived, while shipments belonging to Pakistan Refinery Limited (PRL) and National Refinery Limited (NRL) are expected to reach port on October 23.
Officials explained that fuel pricing is regulated by the federal government, which already incorporates several levies and taxes. “The cess issue is essentially between the provincial and federal governments,” an industry representative said, adding that oil companies had requested the federal authorities to include the SIDC in the petroleum pricing formula — similar to the petroleum levy — so that it could be passed on to consumers.
The Sindh cabinet had earlier directed the oil industry to furnish annual bank guarantees of Rs25 billion, a requirement that the companies described as unfeasible. The Oil Companies Advisory Council (OCAC) raised the issue in a letter to the petroleum secretary, who subsequently referred the matter to the SIFC for urgent resolution.
The SIFC is now working on a long-term settlement plan. Industry stakeholders have proposed integrating the SIDC into the oil pricing mechanism, though this could result in higher fuel prices.
The cess has been imposed by Sindh and Balochistan on petroleum imports since 1994. The Sindh High Court upheld its validity in 2021, but the Supreme Court later suspended that decision while maintaining existing bank guarantees until a final ruling.
In July 2023, the Sindh Excise and Taxation Department reinstated the requirement for local tax declarations before goods clearance. However, following interventions from the Petroleum Division and OGRA, an interim arrangement was agreed upon, allowing submission of undertakings instead of bank guarantees.
Industry officials said the SIDC poses significant financial risks for importers, as a single 40,000-ton oil vessel costs around $40 million. They urged the federal government to issue a clear policy exempting petroleum imports from the cess and to ensure uninterrupted cargo clearance to protect national supply chain continuity.
It should not be imposed ideally since Highways and Ports and even Pipelines are Federal Governments jurisdiction under constitution.
If Balochistan and Sindh wants to impose development cess it shouldn’t be on transit through the province being consumed in Punjab and KPK. It should only be on product consumed in the respective provinces. And once it is for that purpose, it should be a sales tax.